• Move follows surge in capacity, competition across industry
  • Analysts see potential rebound by late 2024 on consolidation

China’s Longi Green Energy Technology Co., the world’s largest solar manufacturer, is cutting almost one-third of its staff to slash costs in an industry struggling with overcapacity and fierce competition.

Longi plans to trim as much as 30% of its workforce, which last year totaled about 80,000 at its peak, according to several people familiar with the matter, including some briefed by senior management. The people asked not to be identified because the plans aren’t public.

The move signals an acceleration of job cuts that Longi began in November, when it started laying off thousands of people who were mostly management trainees and factory hires — a reversal after years of breakneck expansion across the global solar industry. It isn’t clear how many employees had been dismissed before this latest decision.

Longi rejected as false the suggestion that it would cut 30% of staff and said reductions would involve about 5% of total employees.

The solar sector is facing an “increasingly competitive environment,” the company said in a statement. “In order to adapt to market changes and improve organizational efficiency, Longi is optimizing our workforce.”

Xi’an-based Longi isn’t alone: China’s solar industry dominates global manufacturing but has suffered from layoffs and suspended investment plans in recent months. Manufacturers have been forced to sell at or below production costs after prices for solar panels fell to record lows last year. The result is that an industry seen as crucial to the global energy transition is struggling with excessive capacity, consolidation and the possibility of bankruptcies.

Fierce competition has also forced many companies that make wafers — a solar panel precursor that is wired into cells and assembled into modules — to cut production. Longi, a leading wafer producer, had to significantly cut prices last year.

Staff at Longi have seen previous efforts to cut costs fall short, including the cancelation of free afternoon tea, shrinking budgets for business trips and being told to only print in black-and-white unless approved to do otherwise by supervisors, the people said. Longi’s Shanghai office also stopped offering free coffee, two of the people said.

Amid rising internal concerns about job losses by rank-and-file workers, the company late last year disabled an internal function where employees could see the total number of staff, some of the people said.

Beyond the overcapacity and competition issues, there have been other headaches for Longi and the industry: some Chinese manufacturers have had their exports to the US held up over alleged forced labor abuses in China’s Xinjiang region, accusations which Beijing has repeatedly denied. Longi saw its American joint venture in Ohio, which it built with a local partner, face pushback as political tensions between Beijing and Washington rose.

For Longi, the financial pressures sent its net income plunging 44% to 2.52 billion yuan ($350 million) in the third quarter of 2023. Company President Li Zhenguo said in October that the firm “made a mistake” in not being aggressive enough in price competition with peers and was likely to miss its annual shipment target. The company’s shares have fallen about 70% from their peak in 2021.

The solar industry has a history of boom and bust cycles, as its growth soared and stalled at the whim of government subsidies. Once-top manufacturers like Suntech Power Holdings and Yingli Green Energy Holding Co. later filed for bankruptcy or entered judicial restructuring. On the flip side, cheap solar panels are driving a surge in demand, with new installations soaring 72% to a new record last year, according to BloombergNEF.

Riding a wave of investment and demand for solar power globally, employment at Longi had surged from the 4,068 people it had in 2012, when the manufacturer went public on the Shanghai Stock Exchange. The company reported 60,601 of employees at the end of 2022, and hiring continued well into 2023, according to the people.

That’s all being reversed now.

Employees who left Longi recently were often fired directly or quit after being transferred to different positions that they weren’t able to take, while factories using older technologies have seen more job cuts than other units, some of the people said.

Despite the recent challenges, China’s solar industry could start to see a rebound by year-end, with margins rising in 2025 based on a “quickening pace of consolidation” and a better balance between supply and demand, according to an analysis by Bloomberg Intelligence.

Longi should be in a good position to weather that turbulence: Beyond being a market leader, the company had about $7.4 billion in cash and equivalents at the end of 2022, far more than most of its competitors, according to company filings and a comparison with peers identified by Bloomberg Intelligence.

Written by: Bloomberg News — With assistance from John Liu, Luz Ding, Dan Murtaugh, and Alfred Cang @Bloomberg

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